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tv   Power Lunch  CNBC  October 26, 2012 1:00pm-2:00pm EDT

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thank you, brian. welcome to "power lunch." people are buying, it is boosting the economy, but more an more companies are on the defensive. so where is the disconnect and who's got it right? ignore at our peril. a dire warning to the presidential candidates about a drag on the economy that some say is getting shoved to the back burner. and come with me, will you? and as a matter of fact, come sail away. we'll take you on-board an innovative investment that you will need to see to believe. oh, to have that kind of money. we'll have that straight ahead. let's begin with a man who is always on the money, my partner for the hour, simon hobbs is down at the nyse. >> down here on the floor of the nyse, we were hovering around the flat line for much of the morning but the starts have started to take a leg down. we are off our lows. we were down about 63 points on the dow. we've traded slightly higher, just currently down 22 as you can see. good gdp data coming out today
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but those earnings, not least apple last night, failing to give the bulls enough courage really to drive the market higher. we will see how we fare during the course of the next 60 minutes, sue. back to you. as you just mentioned, positive news on the economy ahead of the elections. u.s. gdp growing faster than expected. it looks like consumers are hanging in there. but corporations are still sitting on the sidelines. our steve leisman is here to break down the data and look at what it all means for the economy ahead. >> we saw from the data this morning a split economy with consumer growth hanging in there. we saw that also with this morning's confidence numbers. business investment though is flat to down. the best part of the 2% growth number is that it is an improvement from the weaker 1.3% figure from the second quarter. and the housing we got started to show up in the broader economy. here's how we got to 2 prg%. consumers, 1.42 percentage
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points to the gain. business, investments and inventories ticked down a quarter point. federal defense spending up 13% on an evaen annualized basis. it follows three straight quarterly declines. this is a lumpy kind of thing. it shows up, it doesn't show up. it looks like the drought ticked away about a half a point of inflation. economists look to be sticking with their forecast for the fourth quarter that this sluggish 2% growth number is going to remain around 2 where is, plus or minus a couple tenths. the most optimistic forecast for the pal lifting over the economy with the election uncertainty leaving and resolving the problem of the fiscal cliff. this is the number the fed thought it would see whether it decided to do qe3. >> that's one element of what we're talking about today but there is also this disconnect out there. consumers seem to be spending
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significantly in some sectors of the economy, yet at the same time, you have companies warning on their earnings and there is a disconnect in there. what does your gut tell you about which section of the economy is right, the consumer or the companies? >> there's no track record on business leading the consumer, consumer leading business. i think business does not believe in the consumer demand. business is more concerned than the consumer is with the fiscal cliff and some of the serious debt issues out there. uncertainty i think over taxes and regulation. the consumer sees the better housing numbers. if that can remain in place and business can start to believe that the consumer is indeed optimistic enough to spend, then maybe business will start to span higher and invest. that is the virtuous circle we are looking for. and have been for quite some time. >> simon? sue, let's stick with the u.s. economy. so-called fiscal cliff is still two months off but the threat of tax hikes and spending cuts is already reverberating through the economy. a new report by the national association of manufacturers
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says that if congress doesn't reach a deal to avoid the cliff, then about 6 million jobs will be destroyed through 2014. it expects the unemployment rate to soar if that happens to almost 12%. the nation's ceos also of course on the fiscal war path yesterday. we spoke to one of those 80 who are calling for congress to take action. today jpmorgan's chief jamie dimon continues the drumbeat in asia. >> the underlying strength of the economy is actually pretty good. corporations, no market size companies, consumers are in better shape. housing is turning. it isn't as strong as anyone would want. what's really, really important is good policy. we need good policy in the united states. think of a fiscal deal, simpson-bowles type deal. i think that would make all the difference. we would urge anyone who becomes president to try to get some of that done quickly. >> clearly a lot of attention there. there's also concern that another area of the economy, housing, might get pushed to the
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back burner. our next guest wrote an open letter to president obama and governor romney asking why housing is not front and center of the campaigns. "considering the depth of these debates and the months of political advertisements in this campaign, it is discouraging that there has not been serious discussion about housing. as leaders, you ignore housing at our peril. the remax chairman and co-founder who wroelt that jote us now on the program. thank you for joining us, dave limit niger. we know housing is important. people know housing is important. are you asking for two specific things. one is that they don't eliminate mortgage interest reductions. they don't eliminate that tax break. why in your view when the country can't afford what it's doing should there be an entitlement still for those that have mortgages when there isn't an entitlement or tax rebate for
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renters. why should renters subsidize mortgage holders? >> well, the tax deduction has been there for over 50 years to encourage home ownership. the problem we've got is we've just gone through the worst five years of housing in the history of the united states. if it has to be tinkered with, if we have to change it, we agree we'd go along with that. but we don't think it should be done in the next year or two as we're just now getting our feet on the floor and starting to recover. >> dave, a lot of people think that perhaps one of the reasons that housing hasn't come up in a more substantive way in the debates is because neither candidate really knows how to solve it, that the depth of the housing crisis is still with us, although we are recovering slightly. but neither candidate really has a way forward in terms of housing. >> there's the possibility that's very true, but in reality, there's two or three things that we could do to ensure housing continues to pick
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back up. first, the mortgage interest deductibility. we just can't tinker with it for the next year or two. we've got to get our feet on the ground. the second thing is we have a debt forgiveness act that expires december 31st that, if it expires, we'll definitely affect short sales. short sales are 20% of the market right now. >> yesterday 80 ceos were writing open letters to do with the fiscal cliff. today you come through specifically on housing. it worries me when i see people like you having to do this in public because i'm concerned that in private, you have lost the argument and that's why you have to go through this and show that you are lobbying. does anybody actually care in private, in the corridors of power, about what you're talking about? i mean have you had the conversations and just been unable to persuade them? >> we have had many conversations with various government leaders. the truth of the matter is it
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hasn't been addressed because it is a very difficult subject and it's very controversial. the two candidates are trying to get elected and so they're very careful not to say things that are terribly controversial at this time. behind the scenes, trust me, everybody in treasury, in housing, everybody is talking about we've got to get housing off the bottom. >> mr. liniger, thank you for your team. we'll see how that develops. remax chairman and co-founder of that business. thank you, sir. simon, more now on the politics of this and where the race stands heading in to a very crucial weekend. our chief washington correspondent john harwood is here in the studio with me. less than two weeks to go. it is all boiling down to those swing states. governor romney in iowa right now. >> swing states are where all the action has been for months. many people in states like new york aren't seeing much of the campaign. but it really comes down to nine places. you look across the map all the way in the east to new hampshire, to the west to
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nevada, and we've got now swing state polls from nbc, the "wall street journal" and the maris college institute of two of those states. first is colorado. we see that president obama and mitt romney are now tied in that state. nine electoral votes, very important. you then look to nevada where the president's holding a lead still. 50-47. the reason that's important is that mitt romney, all of these battleground states are states that barack obama carried in 2008. mitt romney has to take away most of them in order to get the 270 electoral votes, sue. he hasn't gotten there yet. he's got some advantages in places like florida. he's moving up in virginia. but he's got to try to crack ohio and then you've got states like out west like nevada which are the president's holding a lead. in wisconsin, paul ryan's home state, holding a lead. if mitt romney can't put together some combination of those he's not going to make it. >> does your gut tell you if he'll be able to do that, or no? >> continues whether or not he gets a breeze at his back and
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sustains momentum. he got a lift after the first debate in denver. that's made a difference. the question is, is that lift gone or is that momentum still going to push him. if he has it, then he can get over the hump in those swing states. if he can't, it is a grind-it-out operation with turnout machines on both sides. you have to assume that given the stability of the leads in the battleground states for the president so far, he's the favorite to hold on enough with what he needs. >> you're going to be a busy man, john. thank you. speaking of getting busy, let's get back to that big storm that could hit a direct slice of the northeast corridor as early as monday. perhaps even bigger, they say, than last year's hurricane irene. with winds near 80 miles an hour, right now hurricane sandy is moving north along the eastern seaboard, already impacting portions of florida and georgia. mary thompson is tracking preparations ahead of the big storm. >> it's already been dubbed
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frankenstorm over the halloween horror story at lowe's. the east coast of course bracing for a storm with potential to do billions in damage. the latest update from noaa says heavy rains and flooding is forecast in the mid-atlantic states but high winds could be felt from the carolinas all the way up through new england. corporate america's prepping to serve both customers and protect its employees in light of this storm. at lowe's, a 24-hour command center tracks the storm while it shipped generators, batteries, chainsaws and other items in high demand after the storm to northeast markets expected to be impacted by sandy. as for the power provider, citi noting four with big exposure to the mid-atlantic and pennsylvania areas where the heaviest rains and flooding are forecast. banks saying any earnings risks for these companies lie in prolonged outages. farther north in the tri-state
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region where heavy wind could cause outages, utilities building on lessons learned from last year's hurricane irene. more using soesh media to keep customers informed and calling for reinforcements early on. insurance slightly lowered today with few major storms recently. they're pretty well reserved for sandy. of course, estimating any potential damage is difficult now. it will depend on the strength of the winds and of course the storm surge. but keep in mind hundreds of billions of dollars worth of residential property are in the path of this storm. >> mary, for the moment, thank you very much. meantime, one of the most interesting things over the last 24 hours has been the resilience of apple stock on the back, of course, of its earnings miss. pre-orders for the ipad mini being taken today. can the business keep up with demands or is it turning into a case of whether apple can keep demand going. plus, ahead in the show, united airlines pilots up in arms after a key safety feature is taken away from their planes. jane wells, what on earth is
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going on? >> reporter: simon, say you bought a new car, had an extra piece of safety equipment in it, like an extra air bag. wasn't mandatory but came with the car. would you pay to take it out? united has done something similar with the 787 and a 9/11 widow is furious. is safe enough good enough after the break.
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one of the interesting things about this week as we check in on the bond market is the fact that yields have gone
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on the 10-year anyway almost nowhere. we've had had a lot of volatility in the stock market which is leading a lot of people, including jeff kilburg to wonder where the money is actually going. it has not been moving into the 10-year despite the volatility. we are basically at the same yield that we were when we came in to this week at 1.77%. that's your bond report for today. but stay tuned, there's more. we are also keeping a very close eye on apple today. yesterday's earnings report wasn't all that. a rare miss for the company on earnings. the stock dipped below $600 for part of the morning. the first time we've seen that since july. but there may be a story within the story as we look at apple trading at $598.40. jon fortt has been in studio with us all week. you think that perhaps the street is misreading this a little bit. things aren't exactly the way they appear. >> i think as people have taken some time to look deeper into the numbers, listen to apple's commentary last night, a few things are standing out. one, the iphone number, really
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not that bad based on what some people had been expecting. the older iphones continue to sell pretty well. iphone 4s and 4. then you've got the fact that the ipod and ipad refresh really caused apple to have to make a lot of adjustments. if you look at property plant and equipment in apple's report, what they spent on that doubled year over year. you consider -- i mean that's a big expense. apple's story about why margins are coming down, i think some of the apple bulls at least have latched on to that heading into next quarter. plus the fact that apple forecasted $52 billion in sales for the holiday quarter. not all bad. the question is, this ipad mini, how well will it sell. if that looks big, people might start feeling differently. >> i think the white version of that basically sold out right away. that bodes well. >> we don't know how many they made. >> well, okay. i'll give you that. the holiday season's coming up.
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it is a great stocking stuffer. right? the smaller version. >> that's what tim cook would say. >> jon, great to have you here this week. thanks so much. >> i wish you were filling my stocking, sue, if that's what you give the kids. this next item is a real head scratcher. get this -- boeing installs a new safety device for pilots on its 787 dreamliner jets. but united airlines, one of the nation's biggest carriers, decides it is going to strip it out. certainly it has the pilots in a rage. our jane wells is at lax airport with more on that. it is very curious, jane. what's going on? >> reporter: well, simon, first explain what it is. the secondary cockpit barrier is a folding metal gate which drapes across the aisle to prevent or at least slow a rush on the cockpit if the pilot steps out to use the restroom. it is standard issue on the new boeing 787 but united had the grate removed which has angered the pilots. the gates aren't mandatory under
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federal rules but why go to the cost of removing a pre-installed piece of safety equipment. it is a weight issue? i'm told it only weighs 10 pounds. pilots like john russell who is also a union rep thinks the newly merged airline wants to standardize the fleet to continental's standards. >> united airplanes are all equipped with this, or just about all the airplanes. none of continental's airplanes are equipped with it. what they would rather do is take all safety features off the united airplanes and any new airplanes, why spend the money. and on the airplanes that didn't have the barrier, they would come up and move the cart there. that was the deterrent. we've seen video of people hopping over that thing, boom, boom, boom. they're in the cockpit. >> the widow of united captain who died on 9/11 has written the ceo jeff smisek to express her fury. she didn't believe the news at first that the barrier on the new dreamliner had been taken out.
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>> i thought they were joking. it took me a while to look up the information and find out that indeed that was true. i have struggled to try and figure out one reason that united would remove these barriers. there is nothing that i can come up with. >> well, we asked united which gave us this statement. "flight security has various components. this security matrix can vary from one type of aircraft to another. we are thorough in carrying out our security responsibilities for every flight. the safety and security of our employees and customers are our top priorities." simon? >> my sources within the airline industry, jane, are exasperated over safety issues at the moment. and they think there is an element of overkill from outside, not least from the tsa. they would point out that a modern cockpit now is so secure, it is the most secure place on an aircraft and you cannot penetrate it with anything that you are likely to be able to carry on a flight. so why, they might argue, go this extra mile?
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>> reporter: well, first of all, the pilot has to open that door to use the lavatory. this secondary barrier could slow a rush. you could also argue a flight attendant -- a fit flight attendant with a cart could perhaps do that. though on a 787 it is a pretty senior flight. don't know how many flight attendants you'll have. bigger question is if the plane comes with it, why spend the money to take it out. again, united won't say, but pilots suspect that this is an effort to standardize the fleet to continental's standards so that eventually it will be all the planes will be like continental, which don't have these gates. >> i get it. jane, at lax for the moment, thank you very much. let's return to the markets. it is quite clear that the weak earnings have been weighing on the markets. one drugmaker today though posting positive results. details on how exactly merck is beating the street and what it means going forward. but first, a look at the biggest gainers of the nyse as we head into the weekend. oh, yeah.
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welcome back to "power." joining me, jeff kilburg, founder and ceo of kilburg management. merck is first up. drugmaker beat wall street expectations earlier today, reporting third quarter earnings of 95 cents a share saying it continues to expect full year revenue to be at or near 2011
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levels. the stock is down a little bit. what do you make of it? >> we did see an initial pop, sue. we're really interested here because the profits at a one-times tax gain. singulair. they're getting a lot of traction in emerging markets. i like it though it is at the 52-week high. >> even though it is down .66% today. you look at the chart, can you see it's definitely moving up. goodyear reported a near 32% decline in profits, drop-off in european tire sales. perhaps no surprise on that. right now the stock is for the year down 31%. >> a lot of air out of this tire. >> down 10% today. >> got whacked on this news here. 53 cents was the estimate here. 53 cents was the reporting. very discouraging but this has been a reoccurring theme in all of the earnings this week. it is all about the european
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situation. they actually made money in north america but it is the european situation. now they are trying to reposition. tough situation but from a 52-week perspective, they're pretty low on the low end of the range. maybe you come in here and take a shot. >> down almost 11% on the trading session. looking ahead to next week, you have your eye on ford. >> this is all about the european situation. you remember we've talked about this on "power lunch," that initial remanufacturing, they cut capacity by 18%. initially it was 300 million. now at 1.5 billion. is ford doing the right thing by shutting down those plants? we will see but they are a global bellwether. >> down better than 1% today in an otherwise kind of drifting market. we'll pay attention to that. investing in the heartland. we'll speak to a top fund manager who only invests in smaller companies in the midwest. we'll get the real health of the corporate balance sheets in his economy and give you his top picks as well. plus, it could be the storm of the century. the east coast bracing for
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hurricane sandy to make landfall. the latest on that storm's track coming up next on "power lunch."
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welcome back to "power lunch." i'm bertha coombs. metals closing in the gold pits at this hour. gold which had edged higher following that gdp number, falling here at the end of the day, down for three straight weeks. gold reaching near $1,800 an ounce following the fed announcing what we have been calling qe infinity. has really given up all of those gains, now slumping back towards $1,700 an ounce. silver is the big loser, very volatile though gaining a lot more in the days of gains this week but as of today it is now closing down for the sixth straight week. copper down for the third straight week. thank you, bertha. let's check the stock market action. what's remarkable is how inactive it is today. i'm -- big day for gdp, apple and amazon last night. >> we were expecting a lot of
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volatility on apple and apple's down a little bit here but the rest of the market is not really moving that much. the dow and the vix, we're not getting the volatility that you would expect. the conviction up just a little. that's not really statistically significant. keep an eye on bank stocks. earnings are largely out here. we've seen a little bit of weakness here today on not a lot of news. as far as sandy goes, i've been calling around asking some people what do they think, any trading ideas. i don't hear a lot. the obvious play is the roofing and waterproofing companies. owens-corning and beacon roofing. roof replacements are up a little bit but not on big volume. rpm and grace do a little waterproofing, but not a lot of volume there. utilities, we had widespread power failures during hurricane irene last year. that might impact some of the utilities. they're on the downside a little. again i don't see big volume. that's what would impress me.
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finally on the insurance companies, some of the ones -- travelers, chubb, hartford have notable exposure. but again, i don't see big volume. remember something -- flooding, water coming from the ground up is not covered by homeowner policies when you get the roof blown off and the water comes in from the top, that is. but flooding coming up from the ground, not could have had. >> you hope you've got a decent insurer who won't say it is pre-existing. believe me, i've been there. for the week overall we're down. it's been -- the stock market has fallen. do you think it is the calm before the storm, the presidential election, the fiscal cliff, or do you think we could be like this for some time? >> i think the reason the market dropped this week is because the revenue numbers came in much, much lighter. earnings sort of came in this line, they were flat overall. but revenue numbers were below expectations. every day the majority of companies that i looked at were reporting light revenues. that's not baked in to the numbers. that was the big surprise this season. i'm sure there's some influence
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now. i'm quite sure revenues were a surprise. >> thank you. courtney reagan is looking at events at the nasdaq. >> good afternoon. i want to draw our viewers' attention to shares of apple down 1.8%. at one point session lows down 3% after that rare earnings miss after the quarter. goldman sachs lowering from $810 to $760 worried about that gross margin going forward as least for right now. look at shares of amazon though. investors are not discouraged by those results after the company posted its first quarterly loss in more than a decade. investors picking up where they left off, looking at the long term which is what the company is doing with all of that investment infrastructure. we're seeing those shares up 4.4%. verisign is a website domain name registry. in its earnings report it deveeld to the u.d
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revealed the u.s. department of commerce may not review its contract before it expires. that's trouble for verisign. last time with irene they said it could be the storm of the century. they're saying it again now with sandy. weather channel's maria la rosa is here with the very latest on a storm that we could very well remember. over to you. this storm is going to be unique in a lot of ways. first off, it is still a hurricane. maximum winds at 80 miles per hour right now. it continues to draw in the showers and the thunderstorms on the east coast of florida. take a look at the satellite picture. these are the current numbers. 80-mile-per-hour winds. pressure down to 970. moving to the north at about 6 miles per hour. let's take you to the radar. we have already some of these bands continuing to bring that squally weather from daytona down to miami. we're starting to see some of those bands begin to approach the southeast coast, including charleston, into wilmington, where right now we now have some tropical storm watches posted there. the warnings for the east coast of florida, we head up towards
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savannah, into cape hatteras, that's where we have the tropical storm watches posted. of course we want to know where does sandy go from here. we still think it will take a little bit of a right turn away from the southeast coast and then at some point on monday continue to push and move now towards the northwest. that gets it very close to the mid-atlantic and the northeast coast by late monday, into early on tuesday. right now the official forecast is to have it a landfalling hurricane somewhere between virginia beach and up into new york. now obviously you see this big area right here in red. that is because we expect the wind field of this storm to be huge. we're talking gusty damaging winds could be felt as far west as pittsburgh, along with those areas that will be immediately impacted by the landfall. on top of that, we are talking heavy rain and big push of water so coastal flooding will be a big concern as well. >> maria, thank you. we're ready for her. we'll see what happens. thank you. governor mitt romney campaigning in iowa at this hour. as you take a look at this live
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picture. in this tough economy, investors and corporations have an awful lot riding on the health of the nation's midsection. given the magnitude of what's at stake, if one has the pulse of this region, it's steve rosen with reliance capital partners, an ohio based private equity firm which invests strictly in smaller to mid size midwestern firms. welcome to "power lunch." pleasure to have you with us, mr. rosen. you've made a number of investments in small and mid size companies in this part of the country. one of the reasons you say is the mature nature of some of these companies and also the education of the workforce. correct? >> sure, absolutely. both myself and my partner are native to ohio. and we believe in the region. we believe in the skilled workforce. there is plenty of opportunity here. notwithstanding a sluggish economy, that's why we're here. we could have located in financial centers, but we chose to locate right here in ohio. >> where have you found
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opportunity? are there particular sectors that you think have provided more opportunity for you than others? >> well, sure. success in manufacturing in any small business -- and we invest in small and mid size business -- starts with people. and we have a great talent workforce here in ohio and throughout the midwest. this is key to manufacturing anywhere, whether it's the midwest or anywhere in the nation. we also have very elaborate supply chain networks. mature, developed, good transportation. so we're bullish on ohio. >> there are challenges, however. we see that when we see the unemployment report and other economic data. give me your thumbnail sketch of how the economy is in your backyard and what challenges some of those businesses face right now. >> sure. it's sluggish. small business owners today primarily are concerned about access to capital. working capital.
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we certainly are concerned about washington. small business today is concerned about washington. we've invested in over 27 companies over the past ten years. many of those in ohio. although we're getting quite a bit of attention now, we want to get back to business. >> what would you say is the number one challenge? is it access to capital and how tight is credit there? >> credit is tight. it's small and mid size business has been struggling for quite a while with access to capital. that's really an important thing for us as investors and -- active investors in the region, to provide capital to those businesses so they can grow. working capital is certainly tight these days for small business. >> in this neck of the woods we hear a lot about the looming fiscal cliff and when i'm down at the new york stock exchange, it seems like every day there are ceos down there that i'm interviewing, urging washington to basically reach across the
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aisle, make a deal and avoid the fiscal cliff. how big a concern is it to your company and also to the companies that you invest in? >> well, certainly we are concerned. we're all looking forward to the end of this election cycle. quite a bit of advertising in our markets, as you know. >> yes. i'm sure you're ready for this election. >> we haven't seen a commercial other than a political one in some time. however, small pis today is more concerned -- less about big policy issues in washington and more concerned about their business, whether they can be competitive, do they have capital to be competitive, and certainly that's first and foremost to small business today. >> mr. rosen, thank you for joining us. pleasure to speak with you. let's go over to seema mody with a "market flash" for us. >> i got my eye on some of the newspaper names. "new york times" losing 22% over the past three days after
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reporting disappointing earnings due to weak ad sales. that seems to be weighing on some of the other newspaper names. take a look at the two-day move in news corp., "washington post," gannett, all trading in negative territory. news corp. down about 3%. >> see if the man from the bbc can turn the "times" around. shares of pandora are a key focus on news apple's new music service will roll out early next year. some are suggesting it could be a buying opportunity. thus, call it outrageous, call it incredible, call it magnificent. it's one hell of a boat. our wealth editor robert frank will take us for a spin. robert. >> it is like a mansion but it is actually the hallway of a super yacht. and not just any super yacht. the boat is more than 12,000 square feet. more than 280 feet long. in fact, it is the largest boat
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built in america since the 1930s. we'll tell you the amazing story of this boat called "cakewalk" and how much it could sell for coming up on "power lunch."
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good news on the economy and the gdp report. but you know what? buried in the numbers there, there may be a real warning sign about inflation. we're going to dig in on that. also the internet has disrupted all kinds of businesses. right? could real estate be the next one? and it is officially the $2 billion presidential election. so where is all this money going? we ask a very happy envelopenbc affiliate in a state that could determine the race. all that at the top of the hour on "street signs." pandora appears to be under pressure on news apple may unveil its own music service early next year. investors have sent it down 19% year to date. we knew this might happen.
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some say though it could be a buying opportunity. can the company ultimately compete with apple? that i guess is the central question. julia, can you answer that in l.a.? >> well, simon, it's very clear that a free music streaming service from apple would certainly pose competition for pandora. in fact, a big chunk, by some estimates, half of pandora's listening comes from apple devices. analysts are split on the threat. jpmorgan says buy on the weakness, that the company will figure out how to make more money on mobile. j and p securities reiterated its market outperform on pandora saying apple's threat is overblown and priced in. but piper jaffray's analyst is concerned about. dora pandora's lack of exclusive content and high cost. apple has the advantage of its ios platforms massive scale. we'll have to see just how good
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apple's new service is before we know whether pandora's investors will be really singing the blues. >> thank you, julia. the luxury yacht market, you may know, has long been dominated by ships built in europe. but an audacious investment is under way right here in the u.s. aimed at putting american manufacturers back on the map and showcasing u.s. innovation. our web editor robert frank is in ft. lauderdale, florida, at biggest gathering of mega yachts in the u.s. quite an exclusive club, robert. >> reporter: it is, sue. every single mega yacht behind me that you see was made in europe. europeans account for 85% of the mega yacht market. a few years ago an american businessman asked an obvious question -- why? why can't americans also build mega yachts as big and as grand as the europeans? the last huge ship to be made in the u.s. was in 1930s for jpmorgan. why couldn't we do it now? >> the owner was really -- he's
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american and he just thinks that you could still get things like this built in the united states. and he wanted to give it a try. >> reporter: so the result is a boat called "cakewalk." the boat is more than 280 feet long, more than 12,000 square feet inside. again, the largest boat built in the united states since the 1930s. it was built in bridgeport, connecticut. more than 1,000 people were employed by this project. it's got six guest rooms. it's got a pool upstairs, jacuzzi, even an outdoor theater. when the europeans said the u.s. couldn't find woodworkers as good and europe, they found them in ohio. this boat was an extraordinary experiment and it worked well. now that it is done, it is for sale. let's find out from the seller. >> it would be someone who appreciates top quality, who appreciates the interior work. the inteen yore of this boat is
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exceptional. >> reporter: the sale price for this boat is $195 million. but what's exciting is that once "cakewalk" showed what it could show, proved what it can prove, that americans can do it, too, more and more boat owners are asking that their boats be made in the usa. more of these boats could have the "made in usa" stamp in the next few years. back to you. is there robert, hopefully a nice american made billionaire will anteup up that $195 billi. >> let's hope you can change the name if you buy it though, sue. if you really want to know the health of the economy you should just ignore earnings reports and pay more attention to the consumer, say some. as we head out, here's some of those most widely held stocks and how they're trading. kwh
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economy as we head into the weekend? the q3 gdp data better than expected, and on the other hand, the earnings continue to disappoint. jon? >> my gut's always got to go with the consumer. i know it is a question of who's right here. from what i can see, durable goods being strong, hey, that's a good sign. on the corporate side, we know companies are worried about the fiscal cliff, about the state of the global economy in general. looks like they were holding on to a lot of cash that perhaps could have been used for growth. maybe to hit those revenue numbers. if we have a strong holiday season, i think that's based on the consumer. all bets are off. that will be exciting. so consumer, i think. >> gdp was up 2% because defense was notably strong. that's the outlier. i'm glad to hear that. if you look at the rest of it,
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it wasn't so great necessarily. i do think the consumer is holding up already. i watch earnings and i watch revenues. the shock this week has been the revenues were much lighter than anticipated right across the board and i anticipate you will see that for the retailers as well. i'll stick with a little bit of weakness here. t >> let's move on to a corporate story. citigroup again hitting headlines today. "the new york times" reporting that the chairman, michael o'neill planned to remove pandit for months. pandit was offered three letters of termination, resign immediately, resign at the end of the year or be fired without any cause. guys, should citi have told shareholders that's how the land lay? >> well, first, it is perfectly fair if mr. o'neill decides he wants somebody else to convince the board to do it. what i have a problem with here is mr. pandit came out and said this was my own decision. simon and i were talking about this the day it came out.
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it was nonsensical. now we find out. i agree with harvey pitt. he said given a choice between lying or simply not saying anything, i think mr. pandit should simply say nothing about this. >> i don't know if there's a way to make this a great story from their perspective. but, hey, i don't think that's the way anybody would want to go. it doesn't look good, as bob just said from pandit's perspective. but i think there are a lot of questions about whether they could have communicated better about what was really behind this. like the truth. >> guys, let's finish up with apple. it was supposed to be the big one in corporate earnings this week, reporting of course ultimately weaker than expected ipad sales. the white ipad minis are already selling out. why has the stock been so resilient over the last 24 hours? >> i don't think it is clear that this is a sign of a slowdown with apple. we know they're spending a bunch of money, upsetting a bunch of
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product momentum to try to get everything in line ahead of this holiday season. the reason why -- the competitors are slashing the prices of their wares down to the point where they're making no money in an attempt to grab market share. apple doesn't want to lose out. i think you got to put all that in perspective before you say this means that the apple story is over. >> i completely agree. listen. 27 million iphones? good hefbavens! that's an incredible number. can apple handle two new product introductions at one, the ipad mini and the ipad 4 with the attendant component issues. that's the hurdle -- >> five. five product innovations. >> i'm sorry? >> five product innovations for the week overall. >> right. but the big one is the ipad mini and iphone 4. >> for sure. gentlemen, have great weekends. coming up in the next hour, new signs of inflation. but besides you paying more for stuff, could increasing prices be the thing that really stops
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the fed's easy money printing press? look out below on that one. that's coming up at 2:00 p.m. eastern time. "power" is back in a minute. [ male announcer ] do you have the legal protection you need? at legalzoom, we've created a better place to turn for your legal matters. maybe you want to incorporate a business you'd like to start. or protect your family with a will or living trust. legalzoom makes it easy with step-by-step help when completing your personalized document -- or you can even access an attorney to guide you along. with an "a" rating from the better business bureau legalzoom helps you get personalized and affordable legal protection.
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when we came on the air an hour ago, we were 22 points on the dow. volume still to the downside by 2-1. but basically we're relatively stable. gold, checking out at $17.12. oil, $86 a barrel. relative sideways movements as we head into the weekend, sue. >> indeed. let's bring back in jeff kilburg, founder and ceo of killer capital management. we were chatting in the newsroom earlier today about the fact we've had a lot of volatility in this market but the money wasn't going into treasuries. where's the money going? >> traders are perplexed. the vix under 20. they sold everything in the last five trading sessions. they sold gold. lookality the 10-year. it's provided leadership for the last two years. it hasn't moved out of this range. that's making a lot of folks think that the long end of the curve, maybe an appetite for the 10-year and 30-year may well dissipate. where does that money go? it has to go right back into equities. right now we're seeing a lot on
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the table. earnings. the fiscal cliff. election. if we see one of those give somizatisome sedation to the market. i would think the 10-year should be at 1.5%. it is still snuggled up at 1.80-ish. >> simon, want to weigh in? >> what do i think about where the bond market is? >> yes. >> ask me another one. what was interesting obviously is you have the fed meeting and it had absolutely no change at all. then so many questions about what happens after the election and what happens if there is that romney win in particular, sue. >> we will see. simon, as always, a pleasure. have a great weekend. >> it is a pleasure here as well. thank you very much for watching "power lunch," guys. >> "street signs" begins right now.


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